Stephen Hester declines his bonus. Fred Goodwin is deknighted. Fine. But this is gesture economics. David Cameron remains convinced about the morality of free markets, and their natural ability to make everyone rich. This sharing out is ostensibly carried out by a kindly invisible hand, identified long ago by the Scottish economist Adam Smith, and in recent decades referred to as "trickledown".

New Labour did believe that the trickle had to be helped, but they were so busy actively redistributing, which in itself belied the trickledown theory, that they persuaded themselves that close scrutiny of the source of the largesse was not necessary or desirable. But figures in both Britain and the US show that huge increases in wealth at the top of society have not, in fact, led to any increase in affluence at the bottom. High salaries got much, much higher. Low wages, even average wages, stagnated. Underlying unemployment rose.

The neo-liberal concern is always that, left to its own devices, let alone deliberately channelled by "the state", a trickle can become a flood. But really, the growth in inequality in neo-liberal economies confirms the belief of neo-liberalism's critics – that a trickle is all too easy to dam up.

The debt crisis, quite simply, is the result of the huge efforts that have been made to hide the absence of trickledown. Cheap debt, in the form of mortgages, artificially inflated housing assets, encouraging people to take on more cheap debt, that they could treat like disposable income, created a consumer boom.

Even without a mortgage, you could still get credit cards, lots of them, and continually transfer your debts to the latest new deal. This meant that people felt as if they were becoming more wealthy and affluent, even when in reality they were not. Thus, an illusion was created – the illusion that concentrated wealth really was enriching everyone, when that was far from the case. Is Cameron really deluded, or just cynical? Either way, he is not going to find a solution while he remains so tremendously enthusiastic about the problem.